Pakistan to Replace Dollar with Euro in Trade with Iran

Pakistani businessmen will open letters of credit (LCs) for imports from Iran in euros instead of dollars, a report said.

The State Bank of Pakistan (SBP) told the Ministry of Commerce and other stakeholders in a recent meeting that it was not possible at this stage to open LCs in dollars in trade with Iran, as some US sanctions are still in place that could obstruct payments to Tehran, a senior officer in the ministry said.

The central bank of Pakistan was of the view that businessmen could now start trade with Iran following the lifting of sanctions by the United Nations under a nuclear deal between Tehran and world powers, known as the Joint Comprehensive Plan of Action (JCPOA).

If LCs were opened in dollars, clearance from US intermediary bank would be needed, however, certain sanctions against Iran were still in place in the US and that would cause trouble for Pakistani businessmen, the officer said, according to the Express Tribune.

This is the reason why the SBP has given advice that LCs for immediate trade must be opened in euros. There won’t be any such issue with the euro as any intermediary bank in the EU could clear the LCs, the officer added.

He suggested that instead of waiting for the removal of all sanctions, Pakistan must engage in trade deals with Iran with payments in euros. “We have informed the Iranian side about this option and hopefully LCs will be opened in coming days.”